German Urea Prices Weaken Amidst Dwindling Demand from Downstream Fertilizer Market, Stable in Asia

Hamburg (Germany): The global Urea market has exhibited divergent trends, with prices remaining stable in the Asian market due to soft demand from downstream industries. Conversely, prices in the German market have decreased. This decline is primarily due to reduced costs of essential raw materials, particularly ammonia. Fluctuations in ammonia prices have notably lowered production costs, consequently exerting downward pressure on market prices. Additionally, the overall decline in prices has been further influenced by a decrease in demand from significant downstream fertilizer industry and reduced planting activities.

In the first half of May 2024, the German Urea market witnessed a notable decline of 1.5%. This decline was driven by the falling price of essential feedstock ammonia and diminished demand, largely due to adverse weather conditions. Furthermore, frustrations expressed by Bulgarian farmers regarding EU regulations and rising costs of fertilizers and energy highlight broader concerns about the economic viability of agricultural operations. Addressing these challenges is imperative for ensuring the long-term sustainability of the agricultural sector.

Additionally, the European market saw an oversupply of Urea, with import activities remaining largely unaffected despite ongoing uncertainties in global trade dynamics. Insights from various market sources indicate a slightly accelerated deterioration in euro area manufacturing business conditions. This decline is exemplified by a sharper reduction in the inflow of new orders, marking the most pronounced downturn observed so far this year. These developments underscore the complexities facing the manufacturing sector and warrant close attention from industry stakeholders and policymakers. The interplay of these factors narrowed the gap between demand and supply, thus exerting downward pressure on Urea prices.

Conversely, Urea prices remained stable in the Asian market. The impact of ammonia costs on Urea prices was mitigated by existing cost pressures. Notably, there has been a lack of new orders or bids from both domestic and international markets due to the Chinese government's suspension of exports until the peak planting season of 2024. Although NPK producers were expected to continue purchasing high-nitrogen fertilizers for summer corn application, demand fell short of expectations, thus exerting downward pressure on Urea demand.

Simultaneously, an ample supply of Urea inventories has been observed this week, resulting from the government's suspension of export licenses for various fertilizers, including Urea. Market insights indicate a lack of updates on China's Urea export restriction policy. Given the strong domestic prices, export inspection approvals may be delayed until June-July 2024, and the validity of export certificates is expected to be shortened to 30 days from the previous 60 days. Consequently, no export sales have been reported, contributing to surplus availability in the market.